Will Nichols for BusinessGreen, part of the Guardian Environment Network

Monday 18 June 2012 06.55 EDT
First published on Monday 18 June 2012 06.55 EDT

Government and industry figures have moved to play down fears that subsidies for onshore wind and solar panels could be axed, after a senior minister responded to an anti-wind farm campaigner by suggesting clean energy incentives will be phased out by 2020.

Cabinet Office minister Oliver Letwin wrote to Terry Stewart, president of the Dorset branch of the Campaign for the Protection of Rural England (CPRE), expressing his opinion that dedicated financial support for renewable energy would be removed by the end of the decade as the cost of clean energy technologies fall.

According to an email seen by the Sunday Telegraph, Letwin wrote that: "I anticipate that subsidies for both solar photovoltaic and onshore wind will come down to zero over the next few years and should have disappeared by 2020, since both of these forms of energy are gradually becoming economic without the need for subsidies".

Davey is preparing to confirm new subsidy levels for renewable energy projects under the Renewables Obligation (RO) support scheme, following a consultation on whether these should be reduced by more than 10 per cent for the period between 2013 and 2017.

"If we send signals to investors and to companies that we'll play fast and loose, and we won't go where the evidence is or we won't stick to our word, what will happen? The cost of capital for investment in the UK will go up, so there will be a political risk premium," he said.

"We absolutely have to be green in this government, and being green means being straight with investors and companies and not messing them around."

The Cabinet Office had not responded to a request for comment at time of going to press.

But a Department of Energy and Climate Change (DECC) spokesman moved to diffuse the apparent standoff, pointing out that phasing out subsidies is an "aspiration" of the government and its consultation on the RO states the technology is moving towards a scenario where support may no longer be needed in the longer term.

"The government is committed to driving down the costs of renewables. It is encouraging to see that costs of some technologies are falling," he said in a statement. "If costs fall so that subsidy were not needed for any specific technology, this would be welcomed, but it is not currently clear when that might be."

His words were echoed by a spokeswoman for trade body RenewableUK, who said Letwin was expressing his opinion rather than government policy.

"The government is keen to get costs down for all [energy] technologies," she told BusinessGreen. "There's no rift developing – Ed Davey is committed to lowest cost, as is the industry. The repeated message from government is onshore wind is a crucial part of the future energy mix."